Types of Employer Pensions

By 2018 all employers will have to give you the opportunity to join an Employer or Group pension scheme. These are not Personal Pensions but a pension scheme for a group of employees. They each works in a slightly different way, so it is important to know the specific rule of your scheme.

Defined Benefit schemes

Some schemes specify the pension you will receive at retirement, normally based on your length of service and level of earnings. They “define the benefit” you will get at retirement. Examples of defined benefit schemes are

Final salary

Career averaged revalued earnings schemes (CARE schemes)

Cash Balance.

Defined Contribution schemes

In a Defined Contribution scheme, the contributions into your pension are defined (but not the retirement benefit), hence the name. These schemes invest the contributions made to grow a pension pot to provide a retirement income. Essentially, your pension depends on the growth achieved by the pension pot over the period of the pension. Examples of defined contribution schemes are